Accept offers only from investors with green light sabers – the good guys with integrity, says The Accelerators mentor Ed Zimmerman. Above, a scene from the movie “Star Wars: Episode II Attack of the Clones.”

Translation: If a VC invests $2 million, then he or she can afford to value the company at about $10 million, after the investment. If the company wants less money, the investor’s percentage ownership stake remains the same and the valuation falls. Conversely, if the startup raises more money, the VC will invest more in the round and the valuation will increase — for the very same startup!

Matt asserts that the more you raise, the more the investors will pay in valuation. In fairness, Matt believes this to be true whether he’s acting as a founder or as an angel. (He’s backed 30 or so companies).

I ran that by Alan Patricof, founder of Greycroft Partners and the dean of the New York venture scene. Alan counters that raising less money at a lower valuation in an early round enables the founders to retain more of their company after several funding rounds. Here’s how Alan’s math works: Raising less at a lower valuation should permit the founder to achieve milestones entitling the company to a healthy valuation markup in the next round. The VC also benefits because the heightened valuation reflects an altered risk: reward ratio.

In my view, Alan’s math is right, but not in every instance. He is right if (a) your startup achieves the milestones and (b) the Series A Crunch doesn’t impact you. (The Series A Crunch, which I’ve previously written about, is the likelihood that many startups that have garnered seed funding will not be able to raise next round venture funding). If the startup either falters or hits the Series A Crunch, then having raised less money at a lower valuation has a pernicious impact — the company will have a terrible time raising next round money. Under those circumstances, even if the company attracts capital, it certainly won’t be at a higher valuation than that low-priced prior round. The somewhat conflicting insights from Matt and Alan yield our next key takeaways:

At early stage, venture math tells you to raise more cash to ensure that you can safely hit the milestones needed to enhance your ability to raise subsequent capital at a substantially higher valuation. Secondly, founders who raise less money early, especially in a market that is or becomes choppy, will run the risk of hitting a wall or dropping the price if they don’t hit their milestones.

The notion of raising the price on VCs brings us back to Fred Destin of Atlas Venture. (Read more about Fred in my previous Accelerators essay, “Buy High, Sell Low”). While competitive pressure does add value for the founders, Fred cautions against getting aggressive term-sheets from second-tier firms to pressure tier one venture investors. According to Fred, it “makes the tier one laugh.” While I shy away from describing some funds as tier 1 and others as tier 2, there’s truth in Fred’s position. Sure, in my experience — and I have recent data here — an aggressive term sheet from a fund that is meaningfully lower in stature will still have some beneficial impact on the competitive process. Nevertheless, the founders must be respectful about how they brandish any competing term sheet, and that provides our next takeaway: Founders who make investors feel like commodities traders bidding in the pit are making an enormous mistake about the nature of the VC/founder relationship.

Founders who approach the funding process, or make the VC believe that they’re approaching the process, with a view toward taking any investor at the highest possible price, regardless of attributes like cultural fit, integrity and expertise, do themselves a real disservice. And here’s where I wholeheartedly agree with Fred so I’ll paraphrase him for our last takeaway: Experienced entrepreneurs will tell you to choose the investors with the green light sabers — the good guys with integrity who are a cultural fit – not the ones with the highest valuation.

About The Accelerators

For aspiring or actual entrepreneurs, The Accelerators is an online archive of discussion among startup mentors– entrepreneurs, angel investors and venture capitalists. Although the blog is no longer being updated, its content lives here and you can see an archive of its tweets through June 2015 @wsjstartup.